Which of the following statements about retained profits is true?
A) Retained profits is the sum of past net profits/losses minus dividends declared.
B) Retained profits indicates the total profits earned by a company since its inception.
C) If a company does not pay a dividend,it cannot decrease.
D) Retained profits is the current year's profit.

Question

Quizplus · Accepted Answer

Retained profits are the accumulated net profits of a company that have not been distributed as dividends. It is calculated by subtracting the dividends declared from the sum of past net profits/losses. Option B is incorrect because retained profits only indicate the profits that have not been distributed as dividends and not the total profits earned by the company. Option C is incorrect because retained profits can decrease if the company incurs losses or pays out more dividends. Option D is incorrect because retained profits are not just limited to the current year's profits.

Which of the Following Statements About Retained Profits Is True